What is a Wallet and What is it for?

You need a wallet to store bitcoins. It contains individual key codes for these bitcoins.

There are different types of wallets: on the one hand, those that belong directly to the trading platform where you bought bitcoins. Conversely, wallets that you customize individually.

The two principles of bitcoin storage are also distinguished by the terms Custodial Wallet and Non-Custodial Wallet, from the English words “care” and “trust”. The bitcoin account of many crypto marketplaces is a depository wallet because you, as a user, must rely on their concept of security.

These so-called custodial wallets store bitcoins until you resell them or transfer them to another wallet. Serious trading platforms such as financial advice Bison, Nuri, and Bitvavo have adopted security measures for holding bitcoins to protect the coins from theft. Most bitcoins are stored there offline, that is, without an Internet connection. However, there is no deposit insurance, as is the case with bank accounts for bitcoin and other cryptocurrencies.

In the past, hackers have already paralyzed the pages of exchanges, hacked into user accounts, and withdrawn bitcoins. Then the coins disappeared and investors usually don’t get replacements.

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Which bitcoin wallet is the right one?

There are different providers of such digital, separate wallets and different places where users can store them: a personal computer, a smartphone, or an external storage medium that looks like a USB drive (“hardware wallet”). The idea: Since only you, the user, have access to the devices, the bitcoins on them are safe.

But you can also open a special account online – and use it as a wallet. With an Internet connection, you can access it anywhere. However, just like with atomic exchange crypto, there is a risk that someone hacks into your online account and clears your bitcoins. Therefore, this seemingly practical option is less secure.

How to open a wallet?

To open a wallet, you must first find a provider and download the program to the selected device. Overview pages on the Internet help you choose a provider. With a mobile phone, you will find possible wallet applications in the Play Store or App Store. There are bitcoin trading platforms like Nuri (formerly Bitwala) that give you a choice and offer both a custodial and non-custodial wallet.

If you create a separate wallet, as opposed to a bitcoin trading platform (btc to usdt), you do not need to store any personal data. You only set a personal access PIN and write down a combination of random words (offline keys). The user interface can be used immediately.

Without a backup, bitcoins could disappear

You should write down the offline key (by hand at best) and keep it in a safe place. Because it is also a backup copy of the wallet. So if the hard drive or mobile phone is broken or the special flash drive is lost, you can get back to your bitcoins with the word code – just like anyone else who knows the code.

You can also write private keys on paper (“paper wallet”) and intentionally remove all electronic components of the wallet. Then the word code is the only access to your bitcoins and logically cannot be hacked. However, it can still be lost – and then it will not be possible to restore it.

Lost bitcoin keys are always a big nuisance. In January 2021, a German programmer made headlines because he could no longer remember the password for a million dollar Bitcoin loan.

Check out: Are Free Crypto Wallet Apps Safe?